Oregon PERS cost-cutting proposal includes 'risk sharing' account

The number of public employees eligible for retirement is the highest it has been in since 2010. Julius Lasin & David Davis / Statesman Journal

Wochit

Public employees would help pay for their pensions via “risk sharing” under a new bill introduced Monday in the Oregon Senate.

Oregon Capitol south side in June

Oregon Capitol south side in June

Diane Dietz, Statesman Journal

Senate Bill 1068 would divert up to 4 percentage points of the 6 percent that now goes into each employee’s Individual Account Program into a separate “risk sharing” account. The exact percentage would be calculated biannually based on the cost of future pension benefits and how much of the projected liability is not yet funded by employers.

Senate President Peter Courtney and Sen. Mark Hass, D-Beaverton, are listed as sponsors of the bill.

Discussions about the high cost of pensions for 347,324 current and former public employees — including teachers, police, firefighters and all manner of state workers — have been percolating behind the scenes at the Legislature for weeks. The so-called unfunded liability is currently $20 billion.

Consequently, the PERS agency projects steep cost increases for public employers, with the obligation growing from 17 percent of payroll today to 34 percent by 2021.

In 2017-2019, the bill would produce savings of $106.7 million, according to the Legislative Fiscal Office.

The proposal comes as the Legislature is attempting to close a $1.4 billion budget gap for the 2017-2019 biennium. Democrats and their allies are proposing new taxes on businesses to help close the gap. Republicans and businesses say no tax increases without cost containment, and, at the top of their list is PERS reform.

House Speaker Tina Kotek said the bill is tied to passage of a new gross receipts tax on business — also called a commercial activities tax — passing this session as a "shared sacrifice" with state workers.

The leadership will be counting votes this week as lawmakers weigh the proposed PERS cuts against a potential tax.

Courtney, too, said the business tax is essential.

"We’ve worked all session to get to this critical point. It’s time to close the deal,” he said.

One powerful union says it's ready to back PERS reform — if it's paired with raising revenue from corporations.

"While we can’t support this plan, we are willing to engage with the Legislature around cost containment so long as it is connected to real revenue reform, paid by corporations, that allows Oregon to invest in better schools, greater access to healthcare and improved services for all Oregonians,” said Steven Demarest, president of the 55,000 member Service Employees International Union 503.

Rep. Mike McLane, R-Powell Butte, said: "The first step in solving any problem is admitting that you have one. In that regard, today’s announcement is a positive development. Whether this package does enough to contain costs over the next decade remains to be seen.”

Beginning July 1, 2018, 1 percent of salary will be contributed to the risk sharing account, leaving 5 percent of salary to continue to go into the member’s existing IAP account

Beginning July 1, 2019, 2 percent of salary will be contributed to the risk sharing account, leaving 4 percent of salary to continue to go into the member’s existing IAP account

Beginning July 1, 2021, the PERS Board will adjust the member contribution to the risk sharing account to reflect the “Pension Funding Rate” and “Risk Sharing Contribution Rate”

Beginning July 1, 2021:

If the Pension Funding Rate is less than or equal to 8 percent, then the Risk Sharing Contribution Rate will be 0 percent — the member contribution to their IAP will stay at 6 percent.

If the Pension Funding Rate is greater than 8 percent but less than or equal to 10 percent, the Risk Sharing Contribution Rate will be the excess over 8 percent — the member contribution to their IAP will be the difference between 6 percent and the Risk Sharing Contribution Rate, but not less than 4 percent.